Jan De Nul (Malaysia Sdn Bhd) & 1 Lagi v Vincent Tan Chee Yioun & 1 Lagi (Application No. 02(f)-7-02/2018(W))

Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 1 IN THE FEDERAL COURT OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO: 02(f)-7-02/2018(W) __________________________________________ BETWEEN

1. JAN DE NUL (MALAYSIA) SDN BHD

2. JAN DE NUL GROUP (SOFIDRA S.A) .. APPELLANTS AND

1. VINCENT TAN CHEE YIOUN

2. CENTRAL MALAYSIAN PROPERTIES SDN BHD .. RESPONDENTS [In the Court of Appeal Civil Appeal No.: W-02(C)(A)-1400-08/2016 __________________________________________

1. JAN DE NUL (MALAYSIA) SDN BHD

2. JAN DE NUL GROUP (SOFIDRA S.A) .. APPELLANTS AND

1. VINCENT TAN CHEE YIOUN

2. CENTRAL MALAYSIAN PROPERTIES SDN BHD .. RESPONDENTS] CORAM: RAMLY HJ ALI, FCJ AZAHAR MOHAMED, FCJ ROHANA YUSUF, FCJ MOHD ZAWAWI SALLEH, FCJ ABANG ISKANDAR ABANG HASHIM, JCA Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 2 JUDGMENT OF THE COURT Introduction

1. The present appeal (Civil Appeal No. 02(f)-7- 02/2018(W) by the appellants, Jan De Nul (Malaysia) Sdn Bhd (JDN) and Jan De Nul Group (Sofidra S.A) (Sofidra) is against the decision of the Court of Appeal dated 24.10.2017 dismissing their appeal relating to their application to set-aside an arbitral award pursuant to section 37 of the Arbitration Act 2005 (AA 2005).

2. There is another related appeal i.e. Civil Appeal No. 2(f)-8-02/2018(W) where the appellants are Tan Sri Dato’ Sri Vincent Tan Chee Yioun (Vincent Tan) and Central Malaysian Properties Sdn Bhd (CMP).

3. Both the appeals were heard together, but we will prepare separate judgement for each of them. The present judgment is only in respect of Civil Appeal No. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 3 02(f)-7-02/2018(W) in relation to the setting-aside application under section 37 of the AA 2005 by JDN and Sofidra. The Parties

4. JDN, at all material time, was a private company limited by share, incorporated in Malaysia; and Sofidra, was the ultimate holding company of JDN, incorporated in Luxembourg.

5. CMP, at all material time, was a private company limited by share, incorporated in Malaysia; and Vincent Tan, was a substantial shareholder having a controlling stake in CMP. Background facts

6. CMP was the developer of a project for reclamation of land comprising of a plot of land measuring 38.11 hectares, along about a 2 km stretch of existing Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 4 shoreline bordering Jalan Abu Bakar and Jalan Skudai in Johor Bahru (the Project).

7. CMP by a letter of award, awarded the Project to JDN for its construction. Sofidra was the guarantor guaranteeing the due performance by JDN of its obligations. The relevant contract was executed by the parties on 23.3.2010. It was based on the Construction Industry Development Board (CIDB) Standard Form of Contract for Building Works – 2000 Edition.

8. Works could not start as planned due to CMP’s delay in meeting its initial financial and payment security obligation. Works only started on 8.10.2010 after Vincent Tan executed a guarantee agreement in his personal capacity, guaranteeing the due and functual performance by CMP of its obligations under the contract. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 5

9. By the end of October 2010, CMP was again in default of payment under the contract for progress claim certificates No. 5 and No. 6.

10. Unfortunately, something disastrous happened at the site on 12.11.2010 where much of the reclaimed platform gave way and moved southwards resulting among other, in the loss of one life (the RFI disaster).

11. On 16.11.2010, JDN issued a notice notifying CMP that it had defaulted in its payment progress. CMP failed to remedy the default. On 2.12.2010 JDN terminated the contract.

12. On 12.8.2011 JDN and Sofidra proceeded to refer the dispute to arbitration. An arbitral tribunal was constituted on 31.1.2012 (the Tribunal) and the parties proceeded with the arbitral proceedings. CMP and Vincent Tan filed their counterclaim against JDN in the arbitral proceedings. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 6

13. On 3.9.2015, after hearing the parties, the Tribunal delivered an award (the Award), and held, inter alia, that:

(ii) JDN was responsible for the RFI disaster;

(iii) JDN and Sofidra were ordered jointly and severally to pay CMP the sum of RM2,789,383.57 in respect of CMP’s counterclaim with 5% interest from the date of the Award until the date of payment; and

(iv) each party shall bear equally all the fees and expenses by the KLRCA and the arbitral tribunal. At the High Court

14. On 15.10.2015, Vincent Tan and CMP filed an originating summons to refer questions of law arising out of the Award under section 42 of the AA 2005. JDN Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 7 and Sofidra also filed an originating summons to refer questions of law under the same section.

15. On 23.12.2015, JDN and Sofidra filed another originating summons under section 37 of the same Act to set aside part of the Award which allowed CMP’s counterclaim on the following grounds:

(ii) that the Award was in breach of public policy and/or natural justice under section 37(1)(b)(ii) and section 37(2)(b)(ii) of the AA

2005.

16. JDN’s main complaint was that the contract was a conventional contract with no design obligation resting Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 8 upon JDN; and it was never the pleaded case or contention of the parties nor was any evidence led on the premise that was decided by the Tribunal i.e. staged construction was a design issue, and yet JDN was found to be responsible for the design of the Project.

17. After hearing the parties, the High Court upheld the decision of the Tribunal and dismissed JDN’s and Sofidra’s application under section 37 of the AA 2005 with costs of RM30,000.00.

18. The High Court ruled that the Tribunal had not acted in excess of jurisdiction and there was no breach of public policy and/or the rule of natural justice in making the Award. The High Court found that JDN and Sofidra had failed to prove their case under section 37(1)(a)(v), 37(1)(b)(ii) and/or 37(2)(b) of the AA 2005.

19. The High Court further ruled that JDN’s contention that the Tribunal had gone beyond its jurisdiction is Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 9 baseless, as every opportunity had been given to JDN to present its case in the proceedings. The High Court was of the view that JDN was seeking to take issue with the merit of the Tribunal’s decision which in effect seeking to appeal against the Award to the Court, and this was not permitted in a challenge proceedings under section 37 of the AA 2005.

20. On the issue of public policy, the learned High Court judge had expressed his view that in order for JDN to succeed in a complaint of a breach of public policy, JDN must show that the “most basic notions of morality and justice would be offended” by the Award and the breach is something “clearly injurious to the public good in Malaysia”.

21. In his conclusion, the learned High Court judge ruled as follows: “I am in total agreement with CMP that the complaint leveled by JDN on the public policy ground of a breach of Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 10 natural justice, even if taken at its highest, does not meet the requirements to prove that the Tribunal had issued an award in breach of public policy. JDN have not sufficiently particularized a complaint for breach of natural justice recognizable under the AA 2005.” At the Court of Appeal

22. Dissatisfied with the dismissal of their application, JDN and Sofidra filed an appeal to the Court of Appeal.

23. On 24.10.2017, the Court of Appeal dismissed the appeal with costs of RM20,000.00 and ruled that it was not a fit and proper case for judicial intervention to set aside the Award under section 37 of the AA 2005.

24. The Court of Appeal unanimously affirmed the decision of the High Court. The Court of Appeal expressed its view, inter alia, that “section 37 ground relates to arbitral process. The threshold to satisfy the grounds to be low. However, the court is given discretion not to set aside the award notwithstanding the applicant can Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 11 establish one or more of the grounds set out in section

37. In considering whether or not to set aside the award, the court is obliged to look at other provisions of the Act and take a holistic approach as far as practical to sustain the award.”

25. The Court of Appeal elaborated: “The court’s role is to ensure substantive integrity of the arbitral process is maintained at all stages. Trivial complaints framed as excess of jurisdiction related to the manner the arbitral tribunal had handled the issues which arose from the substantive contract having the arbitration clause should not be much of a concern for the court in the regime of party autonomy concept. Only violent breaches on the face of record which compromise the integrity of the decision making process should be the cause of concern for the courts.”

26. The Court of Appeal further expressed its view that “it is now well settled that in Malaysia, the arbitrator’s Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 12 award is final, binding and conclusive and can only be challenged in exceptional circumstances.” At the Federal Court

27. Leave to appeal to the Federal Court was granted to JDN and Sofidra on the following question, namely: “Whether as a matter of law the Court of Appeal is correct in ruling that the test for the intervention of the court under s. 37 Arbitration Act 2005 as “one where the award suffer from patent injustice and/or where the award is manifestly unlawful and unconscionable”, bearing in mind that:

(ii) the same are not derived from any jurisprudence of the Model Law; and

(iii) the same have been rejected by the Federal Court in Far East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang & 2 Other Appeals [Federal Court Civil Appeal No. 02- 19-047/2015 & other appeals] as the test for intervention under s. 42 Arbitration Act 2005.” Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 13 Submissions by Counsel for JDN and Sofidra

28. Learned counsel for JDN and Sofidra submitted that the test of “patent injustice” or “manifestly unlawful or unconscionable” as applied by the High Court and the Court of Appeal was the wrong test for intervention under section 37 of the AA 2005 as the same cannot be found in the language of the section itself. By applying the said test, the Court of Appeal had imposed an additional requirement and had set an unreasonably high threshold before the court can intervene in the arbitral award.

29. Learned counsel argued that the proper test to be applied for intervention by the court under section 37 of the AA 2005 should be derived from the language or wordings of the section itself listing out the possible grounds for intervention and guided perhaps by the jurisprudence in relation to Art 34 of the Model Law which section 37 of the AA 2005 is based upon. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 14

30. Learned counsel further submitted that once the grounds are established, it is then for the court to decide whether or not to exercise its discretion to set aside the arbitral award based on the circumstances of the case. There is no requirement that the Award must suffer from “patent injustice” or is “manifestly unlawful and unconscionable” before the court may intervene. Thus, it was submitted that the question posed ought to be answered that the Court of Appeal was wrong in determining that the test for intervention of the court under section 37 of the AA 2005 is one where the Award suffers from “patent injustice” or where the award is “manifestly unlawful and unconscionable”; and therefore, based on the proper test to be adopted in respect of section 37 of the AA 2005, the Award delivered by the Tribunal ought to be set aside. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 15 Submissions by Counsel for CMP and Vincent Tan

31. Learned counsel for Vincent Tan and CMP, on the other hand, submitted that an arbitration award is final and can only be challenged in exceptional circumstances as the AA 2005 and the UNCITRAL Model Law require recognition of party’s autonomy and minimal intervention by the court; and the court does not exercise an appellate jurisdiction over arbitration awards.

32. Learned counsel also submitted that section 37 of the AA 2005, which has its equivalent in Article 34 of the UNCITRAL Model Law on International Commercial Arbitration and Article V of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, uses the word “may” as opposed to the word “shall”; and thus, it is evident that the court is vested with discretion to intervene and the discretion must be exercised judiciously guided by the Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 16 best practices under the UNCITRAL Model Law regime and must also be subject to any other specific requirements of the AA 2005 itself.

33. Learned counsel further submitted that JDN’s and Sofidra’s contention that the Tribunal had acted in excess of jurisdiction is clearly devoid of merit as neither JDN nor Sofidra were deprived of their rights to submit on the issues of design and conventional contracts; and there was also no breach of the rules of natural justice throughout the arbitration proceedings.

34. On the issue of public policy, learned counsel pointed out that JDN and Sofidra had failed to specify in what way the Award was in breach of the rules of natural justice that was deemed to be contrary to the public policy of Malaysia. JDN and Sofidra had also failed to identify any procedural illegality that resulted in a substantial miscarriage of justice to them. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 17 Our Decision

35. The main thrust of the present appeal by JDN and Sofidra is two-fold:

(ii) that the Tribunal did not or had failed to provide an opportunity to be heard for the parties to submit on the basis upon which the Tribunal had decided the case, thereby breaching the rules of natural justice which is an instance that the Award may be contrary to the public policy of Malaysia (natural justice/public policy issue).

36. With regard to the excess of jurisdiction issue, JDN and Sofidra contended that the basis upon which the Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 18 arbitral tribunal had decided the case was never “in play” and was based on its “own idea”. This constituted a “new difference” between the parties and the Award consequently ought to be set aside. They claimed that the arbitrator had gone on a frolic of its own and decided the case based on an argued question of law, question of construction of the contract and question of fact without first according an opportunity for the parties to submit on the issue. It was submitted that the Tribunal’s decision that JDN was responsible for the reclamation-failure-incident (the RFI disaster), notwithstanding that the Tribunal had found as a fact that the staged construction was a design method, has disregarded the parties’ pleaded case, contentions and the manner in which the case was represented as well as the evidence led during the arbitral proceedings.

37. The pleaded case of JDN and Sofidra was that the contract between JDN and CMP was a conventional Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 19 contract where JDN builds to CMP’s design; the need for ground improvement, via staged construction, is an issue of design and needed to be specified and communicated; where JDN was not responsible for such design by reason of clause 7.2(a) of the contract.

38. CMP’s and Vincent Tan’s pleaded case was that the ground improvement, via staged construction, constituted a method of construction which was left to be determined by JDN and the reclamation-failure-incident (the RFI disaster) was caused by JDN purportedly not following the Method Statement/Work Programmed as stipulated in the contract.

39. JDN and Sofidra contended that the parties’ pleaded case in the arbitration proceedings was merely that of a contest between “design” and “method of construction”. JDN and Sofidra claimed that the basis of the decision of the Tribunal that although staged construction was a “design” issue, JDN nevertheless Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 20 bore the responsibility to carry out the same was never put forth by the parties; and that finding constituted a “new difference” between the parties.

40. The High Court held that JDN’s complaint did not meet the high standard of the Tribunal having made a determination on a “new difference” that was outside the scope of the submission to arbitration; thus the complaint did not amount to a “new difference”.

41. The learned judge was of the view that CMP’s pleaded case clearly relates to a dispute of whether JDN had breached its contractual obligations in causing the reclamation-failure-incident (the RFI disaster). The learned judge agreed with CMP that the contract was before the Tribunal; and therefore the Tribunal was entitled, and in fact was incumbent, to take cognizance of the contract as a whole and accordingly to determine the parties’ respective obligations under it. The learned judge further said: Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 21 “Howsoever the isolated issue of whether “staged construction is a design issue” is answered, it does not detract the Tribunal from having to determine the overarching issue of whether JDN had breached its Contractual obligations in causing the RFI. With that this court agrees.”

42. We agree with the learned judge that the Tribunal had determined the legal implication of the contract on JDN’s responsibilities, with particular reference to clause 7.2(a) of the conditions of contract. We also agree with the learned judge in his conclusion on the issue that “I fail to see, in the light of the above how the Tribunal could be said to have strayed from the pleaded case and had gone beyond the submission of the parties to the arbitration.” We would also come to the same conclusion (as made by the High Court and affirmed by the Court of Appeal) that JDN’s contention on this issue of excess of jurisdiction under section 37(1)(a)(v) of the AA 2005 was baseless. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 22

43. On the issue of a breach of the rules of natural justice, JDN and Sofidra alleged that the Tribunal had decided the case on a basis not raised or contemplated by the parties in the arbitration i.e. that JDN was responsible under the contract to carry out staged construction and/or ground treatment even though it was found to be a design issue; and therefore the Tribunal had summarily dismissed, without notice, the contentions of the parties’ pleaded case and/or the evidence led in the arbitration hearings as unhelpful; and that the Tribunal, without notice, denied them an opportunity to be heard and/or a fair opportunity to present their case on the issue upon which the arbitration was decided.

44. After reading the records and documents relating to the arbitral proceedings before the Tribunal, we share the same view with the learned High Court judge that in the present case the Tribunal had made a detailed analysis of the parties’ obligations from the perspective of risk allocation based on the evidence Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 23 made available before it before coming to the conclusion that JDN had breached its obligations to execute the works with due care and skill as required under the contract. That finding by the Tribunal was neither contrary to nor did inconsistent with the evidence adduce at the hearing.

45. In the present case, we are satisfied that the parties had sufficiently raised all the relevant issues in their respective pleadings. The Tribunal was certainly entitled to come to its considered conclusion after hearing the parties that JDN had breached its obligations under the contract after detailed examination of the relevant clauses in the contract where the parties have apportioned the risks involved in the scope of the works.

46. The learned High Court judge had given clear explanation to support his finding that the complaint as alleged by JDN has failed to meet the requirements to Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 24 prove that the Tribunal had conducted the proceedings and issued the Award in breach of the rules of natural justice. The learned judge had correctly ruled that JDN had not sufficiently particularized the complaint recognizable under the AA 2005. At paragraph [166] of the judgment, the learned judge explained as follows- “It must be noted that in the present case the Tribunal had given every opportunity to both CMP and JDN to present evidence and make representations on all issues that arose for determination. The parties had filed a total of nine (9) expert reports with voluminous exhibits attached. The parties also proceeded to two (2) joint expert reports; one on the issue of quantum and the other on the geotechnical issues regarding the RFI. As pointed out by Mr Malik Imtiaz, the parties had submitted a total of twelve

(12) written submissions in 895 pages, JDN had applied for permission to put in further submissions beyond the directions of the Tribunal and the Tribunal allowed the application and directed parties to file in their respective further submissions. On top of that, after the close of the Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 25 evidentiary hearing, JDN made an application to the Tribunal to adduce new documents. Though CMP objected, the Tribunal allowed JDN to adduce further evidence after the close of the evidentiary hearing”.

47. The issue of a breach of public policy of Malaysia was also raised by the parties in the proceedings before the High Court judge. JDN and Sofidra complained that the Award delivered by the Tribunal was in conflict with the public policy of Malaysia and/or the rules of natural justice under section 37(1)(b)(ii) and section 37(2)(b)(ii) of the AA 2005.

48. Under section 37(1)(b)(ii) of the AA 2005, an award may be set aside by the High Court, if the High Court finds that the award is in conflict with the public policy of Malaysia. Under section 37(2)(b)(ii) an award is said to be in conflict with the public policy of Malaysia where a breach of the rules of natural justice occurred in connection with the making of the award. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 26

49. The term “public policy” is not defined in the AA 2005. However, the term appears in three different sections, namely of section 4, section 37 and section 39 of the AA 2005. As commonly used, the term “public policy” signifies some matter which concerns public good and public interest. It is a fundamental principle of justice in substantive and procedural aspects.

50. The High Court judge expressed his view that in order for JDN to succeed in its complaint that the Award was in conflict with the public policy of Malaysia, JDN must show that the most basic notions of morality and justice would be offended by the Award and that the conflict is something clearly injurious to the public good in Malaysia.

51. “A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary” by Howard M Holtzmann and Joseph E Neuhaus (Kluwer, 1989) had highlighted the term Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 27 ‘public policy’ as follows: “In discussing the term ‘public policy, it was understood that it was not equivalent to the political stance or international policies of a state but comprised the fundamental notions and principles of justice. It was understood that the term ‘public policy’, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects.”

52. The term “public policy” as appears in section 37(1)(b)(ii) of the AA 2005 covers a scope of “public policy” elements as used generally. However, in section 37(2)(b)(ii) the scope is more specific. It specifically categorizes a breach of the rules of natural justice which occurred in connection with the making of an award as being in conflict with the public policy of Malaysia. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 28

53. The decision of the Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2001] 1 SLR 597, provides a good guidance on the interpretation of the term “public policy” in an application to set aside an arbitral award made by a tribunal, on the ground of a breach of the rule of natural justice for being in conflict with the public policy. In that case Chan Sek Keong CJ (delivering the judgment of the court) ruled: “Although the concept of public policy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would ‘shock the conscience’ (see Downer Connect

(58) at (136), or is ‘clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public’ (see Deutsche Schachbau v. Shell International Petroleum Co Ltd [1987] 2 Lloyds Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum’s most basic notion of morality and justice: see Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 29 Parsons & Whittemore Overseas Co Inc v. Societe Generalede L’Industrie du Papier (RAKTA) 508 F 2d 969 (second Cir, 1974) at 974.”

54. In a recent case of Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 3 MLRA 219, the Court of Appeal held inter alia, that a breach of the rules of natural justice that occurred in an arbitral proceedings which has a real and substantial impact on the outcome of the arbitration and the eventual award rendered, is plainly said to be in conflict with the public policy of Malaysia.

55. Section 37(2)(b)(ii) of the AA 2005 provides that an award made by an arbitral tribunal would be in conflict with the public policy of Malaysia if a breach of the rules of natural justice occurred in connection with the making of the award. The circumstances stated in section 37(2) are by no means exhaustive. Other appropriate circumstances may also fall under the category of “public policy” in view of the opening phrase “without limiting the generality of sub-para Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 30

(1)(b)(ii)” as appears in sections 37(2) of the AA 2005. However, it must be appreciated that the concept of public policy generally is itself a broad concept. But in applying the concept for the purpose of setting aside an award under section 37 of the AA 2005, the concept of public policy ought to be read narrowly and more restrictively. The court’s intervention should be sparingly used. The court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia. As clearly stated by the Court of Appeal in Sigur Ros (with which we agree): “The concept of public policy must be one taken in the higher sense where some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court’s process or powers will be abused.”

56. Even though the court finds that a breach of the rules of natural justice has been established or that an Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 31 arbitral award is in conflict with the public policy under section 37 of the AA 2005, it does not necessarily mean that the award must be set aside as a matter of course. The power of the court to set aside an award under section 37 is discretionary and will not be exercised automatically in every case where the complaints are established. (see: Kyburu Investment Ltd v. Beca Corporate Holdings Ltd [2015] 3 NZLR 644; Sigur Ros Sdn Bhd (supra).

57. The court must evaluate the nature and impact of the particular breach in deciding whether the award should be set aside under section 37. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of UNCITRAL Model Law. The effect of sections 8, 9, 37 and 42 of the AA 2005 is that the court should be slow in interfering with or setting aside an arbitral award. The court must always be reminded that constant interference of Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 32 arbitral award will defeat the spirit of the AA 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice. (see: Ajwa for Food Industries Co (MIGOP) v. Pacific Inter-Link Sdn Bhd [2013] 2 CLJ 395; Taman Bandar Baru Masai Sdn Bhd v. Dindings Corporations Sdn Bhd [2010] 5 CLJ 83; and Lesotho Highland Development Authority v. Imprigelo SpA & Others [2005] UKHL 43). In this regard, the court needs to recognize the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined.

58. The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case i.e. in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 33 the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award. Thus, instances such as “patent injustice”, “manifestly unlawful and unconscionable”, substantial injustice”, “serious irregularity” and other similar serious flaws in the arbitral process and award, would also fall within the applicable concept of public policy and therefore by virtue of section 37(1)(b)(ii) of the AA 2005 when proven, can be a ground for the court to exercise its discretion to set aside the award. (see: Ajwa for Food Industries (supra)). Such instances fall within “the basic and fundamental notions or principles of justice”. The court must adopt the principle as laid down by Howard M. Holtzmann and Joseph E Neuhans as found in their commentary in “A guide to the UNCITRAL Model on International Commercial Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 34 Arbitration: Legislative History and Commentary” (supra) “that the term “public policy” which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects.” The terms “patent injustice” or “substantial injustice” or “manifestly unlawful and unconscionable” as often used by the court in setting aside arbitral awards, do not mean injustice which is more than de minimis; what is required is that the injustice had real effect and had prejudiced the basic right of the applicant. (see: Soh Beng Tee & Co. Pte. Ltd. v. Fairmount Development Pte. Ltd. [2007] 3 SLR 86).

59. In relation to the question posed before us, JDN’s and Sofidra’s main complaint was that the Court of Appeal had erred in ruling that the test for intervention under section 37 of the AA 2005 as “one where the award suffers from patent injustice and/or where the award is manifestly unlawful and unconscionable” as the said Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 35 test has no basis in law and had set an unreasonably high threshold before the court could exercise its discretion for intervention.

60. Before we deal with question posed, it is necessary to first establish whether the Court of Appeal had in fact, made such a ruling in its judgment in dismissing JDN’s and Sofidra’s appeal. We have to peruse the judgment of the Court of Appeal first. If it is established as a matter of fact, that such ruling was actually made by the Court of Appeal in its judgment, then we will accordingly deal with and answer the question posed. If the Court of Appeal in fact had not made such ruling, then the question posed would be highly hypothetical and we will not be able to give an appropriate answer as to whether the Court of Appeal erred or not; or our answer given would be purely academic and does not help in the determination of the appeal before us. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 36

61. JDN and Sofidra contended that the Court of Appeal, at paragraph 8 of its judgment had set out that the test for both section 37 and section 42 of the AA 2005 as one “where the award suffer from patent injustice and/or where the award is manifestly unlawful and unconscionable.”

62. CMP and Vincent Tan on the other hand, argued that the Court of Appeal did not set out the test for intervention under section 37 of the AA 2005 as alleged. The said test for intervention as cited by the Court of Appeal in its judgement refers to a decision in another case, namely, Petronas Penapisan (Melaka) Sdn Bhd. v. Ahmani Sdn Bhd [2016] 3 CLJ 403, relating to a reference on questions of law under section 42 of the AA 2005. It is not for an application to set aside an award under section 37 of the AA 2005.

63. In order to appreciate the issue, it is helpful to have sight of paragraph 8 of the Court of Appeal’s judgment: Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 37 “[8] Appreciating the distinction in our sections 37 and 42 AA 2005 in relation to EAA 1996, the Court of Appeal in Petronas Penapisan (supra), had in simple terms advocated that the test for intervention will be related to one where the award suffer from patent injustice and/or where the award is manifestly unlawful and unconscionable. Parading English judgments in submissions or cases relating to sections 37 or 42 in actual fact have no jurisprudential utility. The test in England can be said to be one related to low threshold to intervene and in Malaysia the legislation has placed a high threshold for intervention. Though the threshold to satisfy the ground state in section 37 may be low …”

64. We have read the whole judgment of the Court of Appeal. We found that the only part of the judgment where the words “patent injustice” and “manifestly unlawful and unconscionable” were mentioned, was in paragraph 8 thereof. From the plain reading of that paragraph we cannot find any clear finding or determination by the Court of Appeal that the said test Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 38 was accepted and applied to the facts and circumstances of the present case. The Court of Appeal cited the passage from another case of Petronas Penapisan (supra) in appreciating the distinction between our sections 37 and 42 of the AA 2005 in relation of the English Arbitration Act 1996 (EAA 1996). The said passage was in relation to the provision of section 42 and not section 37 of the AA

2005. Both these sections relate to different purposes and different tests for consideration. They are not the same. The consideration by the court in dealing with the applications under the sections varies. The cited test applicable in establishing an application under the section 42 may not be the same with and not applicable to an application under section 37 of the Act.

65. In drawing a clear distinction between sections 37 and 42 of the AA 2005, the Court of Appeal in Petronas Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 39 Penapisan (supra), made the following observation (with which we agree): “An application to set aside an award under s. 37 largely deals with issues relating to the award making process and has nothing to do with error of facts and/or law on the face of record unless the exception applies; such as public policy. An application under s. 42 has nothing to do with the award making process but has everything to do with the award per se and error of law on the face of record which error substantially affects the rights of one or more of the parties. The distinction between ss. 37 and 42 is that like of an apple and an orange.”

66. For that matter, even the recent decision of this court in Far East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang & 2 Other Appeals [2018] 1 CLJ 693 (Federal Court Civil Appeal No. 02- 19-04/2016) which CMP claimed had rejected the tests of “patent injustice” and “manifestly unlawful and unconscionable”, to our understanding, was only applicable to an application under section 42 of the AA Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 40 2005 (which was the subject matter of that case) and hence, was not applicable to the present appeal which is based on section 37 of the Act.

67. In the present case, there was nothing to show that the Court of Appeal had dismissed JDN’s and Sofidra’s appeal on the ground that they have failed in the test of ‘patent injustice’ and/or ‘manifestly unlawful and unconscionable’. Instead, the appeal was dismissed by the Court of Appeal on the ground that after reading the appeal records and submissions of learned counsels, the court did not think it was a fit and proper case for judicial intervention to set aside the award.

68. On the above reasoning, we are more inclined to hold that the Court of Appeal had not made any affirmative ruling to apply the test for intervention of the court under section 37 of the AA 2005 as stated in the leave question posed before us. We are therefore not in the position to give an answer to the question posed. Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 41 Conclusion

69. For the reasons elaborated above it is our view that the learned High Court judge had made a correct finding that the Tribunal had not strayed from the pleaded case of the parties in their submissions to the arbitration and had not gone beyond the submissions of the parties. Therefore JDN’s and Sofidra’s contentions on this issue under section 37(1)(a)(v) of the AA 2005 to support their appeal was correctly dismissed. The Court of Appeal had correctly affirmed the decision.

70. The learned High Court judge had also correctly found, (and correctly affirmed by the Court of Appeal) that on the facts and circumstances of the case, that JDN and Sofidra had failed to establish their case on a breach of natural justice and that the award made by the arbitral award was in conflict with the public policy of Malaysia under section 37(1)(b)(ii) and 37(2)(b)(ii) of the AA Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 42

2005. Therefore their appeal on this issue must also fall.

71. In the upshot, we dismiss the appeal (Civil Appeal No. 02(f)-7-02/2018 (W) with costs. We affirm the decision of the courts below. Dated: 31st October 2018 sgd RAMLY HJ ALI JUDGE FEDERAL COURT OF MALAYSIA Advocates and Solicitors Rajendra Navaratnam (with Raja Kumar, Raja Kandan & Mak Hon Pan) M/s Azman, Davidson & Co. .. for the Appellants Kamraj Nayagan (with Kent Chai & Dawn Wong) M/s Mah-Kamriyah & Philip Koh .. for the Respondents Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 43 Cases referred:

1. Petronas Penapisan (Melaka) Sdn Bhd. v. Ahmani Sdn Bhd [2016] 3 CLJ 403 2. For East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang & 2 Other Appeals [2018] 1 CLJ 693 3. PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2001] 1 SLR 597 4. Kyburu Investment Ltd v. Beca Corporate Holdings Ltd [2015] 3 NZLR 644 5. Ajwa for Food Industries Co (MIGOP) v. Pacific Inter-Link Sdn Bhd [2013] 2 CLJ 395 6. Taman Bandar Baru Masai Sdn Bhd v. Dindings Corporations Sdn Bhd [2010] 5 CLJ 83 7. Lesotho Highland Development Authority v. Imprigelo SpA & Others [2005] UKHL 43 8. Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 3 MLRA 219 Jan De Nul (Malaysia) Sdn Bhd & 1 Lagi V Vincent Tan Chee Yioun & 1 Lagi 44

9. Soh Beng Tee & Co. Pte. Ltd. v. Fairmount Development Pte. Ltd. [2007] 3 SLR 86 Legislations referred:

1. Arbitration Act 2005 : sections 37 and 42 2. UNCITRAL Model Law on International Commercial Arbitration: Article 34